November inflation below expectations, at 7.24 pct

India's wholesale price index rose a slower-than-expected 7.24 percent in November from a year earlier, government data showed on Friday.

Analysts on average had expected an annual rise of 7.6 percent. The annual reading for September was revised up to 8.07 percent from 7.81 percent earlier.

COMMENTARY

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

"Today's data primarily reflects reduced pricing power of manufacturing companies on the back of severe demand slowdown. This means, despite the festival season, manufacturing companies were not able to pass on increased cost pressures to the consumer.

"It's a definite sign of moderating inflation on account of growth slowdown yet the number is quite high per se. And, I don't think the RBI will be in a position to reduce policy rates on December 18.

"But the probability of a rate reduction in the month of January has now gone up."

BACKGROUND

- The headline inflation data will be the critical factor for the Reserve Bank of India's scheduled monetary policy review on December 18. A Reuters poll released on Thursday showed economists expect the central bank to keep interest rates unchanged, with respondents split over whether it will cut the cash reserve ratio for banks.

- The RBI has kept interest rates on hold since April because of stubborn inflation, defying calls from business and politicians for help in fighting a slump that has dragged the economy toward its slowest growth in a decade.

- Annual consumer price inflation accelerated to 9.90 percent in November from the previous month, government data showed on Wednesday. The retail inflation is the highest among the BRICS group of emerging economies - Brazil, Russia, China, and South Africa - and is above what the RBI calls its comfort level.

- A surge in manufacturing output pushed industrial growth to its highest in more than a year in October, a sign that Asia's third largest economy may have turned a corner that strengthens the central bank's case against a rate cut.